Two payday loan firms surrender credit licenses and three more could be shut down as OFT ramps up action against lenders

Two payday lenders have surrendered their trading licences after a crackdown by the Office of Fair Trading (OFT).

The OFT said that it is also currently investigating three more payday loans firms for bad business practices and they too could be shut down. The OFT could not name them for legal reasons.

The Payday Loan Company Limited – which operates under a number of names including Cashnet and Paydayloans.co.uk - and Anfield Cheque Cashing Centre have both given up their consumer credit licences and will no longer be able to trade.

Update: The OFT said that two payday firms had now surrendered their licences and three were still being investigated as part of its action on the sector.

It comes after the consumer body last month sent letters to 50 leading payday lenders asking them to take immediate action to overhaul their businesses.

The OFT accused firms of failing to conduct adequate assessments to see if applicants can afford loans, failing to explain how payments will be collected, aggressive debt collection techniques and not treating borrowers with sensitivity and patience.

A spokesman confirmed today that all 50 letters had now been sent. Lenders have been given 12 weeks from receiving the letters to clean up their act.

The action is part of a review of the industry and the OFT said that it would provide a further update to this in June. It is also currently consulting on whether it should refer the entire market to the Competition Commission – an announcement on this decision will also be made next month.

The OFT has already taken action to revoke the licences of three payday lenders - MCO Capital Limited and two cheque cashing businesses that offer payday loans - B2B International UK Ltd (‘B2B’) and Loansdirect2u.com.Ltd.

A spokesman from the OFT said: ‘The OFT has also announced that it has formal investigations open into the practices of three payday lenders. In addition, three payday lenders have also had their licences revoked and two others have surrendered their licences since publication of the OFT’s review of the sector in March.’

Debt: The Citizens Advice Bureau has accused payday lenders of lending irresponsibly by failing to carry out adequate affordability checks on borrowers.

The OFT comes at a time of intense criticism of the payday loans industry. The Citizens Advice Bureau today accused lenders of pushing people into debt by failing to check that borrowers can afford to repay loan.

In a survey of 1,270 payday loan borrowers, with loans from 87 payday lenders, 65 per cent of people did not get asked about their financial situation when taking it out, according to research by the CAB.

Concern: New data from StepChange, also released today, shows that there has been a 109 per cent increase in the number of people contacting the debt charity with payday loans.

The CAB said that during the four months that it collected the data that over 11,000 sought help online from Citizens Advice about payday loans.

Chief executive of Citizens Advice, Gillian Guy, said: 'Payday lenders are not standing by their word to treat people fairly by checking they can actually afford the loans on offer.

'The knock-on affect of their irresponsible lending is devastating for families as they become consumed with debt. 'Many find they have no money to put food on the table, pay the bills or get to work as lenders drain their bank account in a bid to claw back the debt.'

Meanwhile, new data from StepChange showed that there has been a 109 per cent increase in the number
of people contacting the debt charity with payday loans.

StepChange said that the
average payday loan debt now exceeds their monthly net income,
highlighting the profoundly negative impact payday loans can have on
people’s finances.

The charity said it is also 'deeply concerned' by the evidence it sees of widespread malpractice across the sector.

The news follows an announcement today that more than 30 credit unions are taking the fight to payday lenders by signing a landmark expansion project.

It is hoped that the Association of British Credit Unions-led project will attract a million new members over the next five years, with the help of a £35.6million investment previously pledged by the Government to transform the sector.

Advertisement

Share or comment on this article:

Two payday loan firms surrender credit licenses and three more could be shut down as OFT ramps up action against lenders

Credit Card Reality Check Calculator

Your plastic debt

This calculator will show you just how long it's going to take you to clear your credit card balance if you don't wake up, face reality, stop paying the bare minimum and start clearing this punitive form of debt.

Your credit card balance:£

Interest rate:%

Monthly payment:£

Result

Number of monthly payments:

Clear your debt quickly

Now see how much you need to pay a month to clear your balance in the shortest possible time.